Mining News

Mining companies see light at the end of tunnel

EY’s latest Capital Confidence Barometer, reported on Mining.com, shows mining companies are more confident about the coming months. This follows a dismal first quarter of 2014 which saw mining and metal deals drop 51% in terms of value, and 13% in terms of volume, compared to the same period last year:

Yet the results show a modest, but sustained improvement over the previous quarter, with confidence levels in the sector on their way up. According to EY’s study, 60% of the companies interviewed believe global deal volumes will soar in coming months.

The EY report shows that this optimism is arising from increasingly stable global economics, particularly in mature markets:

“Low first quarter deal numbers actually mask growing confidence across the sector,” says Bruce Sprague, EY’s Canadian Mining and Metals Leader. “We’ve already seen increased desire to do deals in Canada [and] transaction activity will come down to whether companies with an eye on M&A can find the right opportunity.”

The EY results show that the number of respondents that believe the market has stabilized has grown to 39% in April 2014 from only 20% in October 2013. The increased confidence in stability follows extreme price volatility and fluctuating global economic conditions in 2012 and 2013.

Respondents to the Annual Survey of Mining Companies also noted severe challenges with the investment climate facing companies, with one exploration company president noting 2013 was the worst since the 1950’s for mining and exploration investment. Another respondent stated difficulties securing investment were a bigger issue than government policy at the moment, as without financing the issue of where to explore is moot. The optimism present in the EY report was also present in the Fraser Institute global survey comments with one exploration company respondent noting:

The investment climate for junior resource companies has been the worst in a generation this year. However there are signs of life so we can only hope we have seen the bottom.